Jonathan Marks is a leading fraud expert. He’s helped companies across multiple markets uncover fraud. Jonathan has innovated compliance by creating the Fraud Pentagon. His innovation builds upon work that was done years ago, the fraud triangle. Jonathan takes it to new levels that are in line with today’s sophisticated, technology-saturated world. Today, he and Tom talk about how you can use the Fraud Pentagon in the field.

  • Jonathan dispels a common myth about the fraud triangle, why it was created, and what types of companies it targeted. He explains why this is no longer enough in today’s world. One of the biggest reasons is that fraud is happening in huge corporations like Enron.
  • The Fraud Pentagon includes the following points: pressure, opportunity, rationalization, arrogance, competence. Jonathan explains his two new additions, arrogance and competence, and why they apply on new levels based on a deeper understanding of fraudsters, their mental states, and their technological know-how.
  • Four of the five points on the pentagon are human factors which lead to stereotyping, or at least the adherents to the fraud triangle believed. And their fear of stereotyping led them to overlook some of the most telling characteristics of fraudsters. Jonathan looks at the Fraud Pentagon as profiling and explains how profiling – not stereotyping – is necessary.
  • The Fraud Pentagon is great in theory, but how is it in action? Jonathan points at a huge difference between the triangle and pentagon. The triangle looks at WHY fraud occurs. The pentagon reveals how he, as a fraud practitioner, uses the framework to advise companies on their policies, procedures, and more, by looking at the gatekeepers. Books and records don’t commit fraud. People do.
  • The Fraud Pentagon is much further reaching than a single risk situation. Jonathan and Tom discuss where else it can be used to find corruption and malfeasance. It doesn’t just apply to fraud practitioners; it can also apply to boards and committees.

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In this episode of the FCPA Compliance Report, I visit with Laura Perkins, a partner at Hughes Hubbard & Reed. Perkins formerly worked with the Department of Justice, FCPA Unit, departing in September 2017. We discuss the decision of self-disclosure of a potential FCPA violation to the Justice Department. Some of the highlights include:

  • What should a company expect after it makes a decision to self-disclose the to DOJ? What information should be in the initial self-disclosure?
  • What should be in the initial investigation plan they present to the DOJ?
  • When should remediation begin and how much information does the government want to know about in this area?
  • What should a company do to satisfy the government it has secured all documents and communications?

We next turned to the resolution phase and discussed several topics including:

  • When is a company ready to present information to the DOJ that it believes the matter should be closed?
  • Whether through declination or charging document?
  • How is the final penalty decided? and
  • Is it through negotiation or simply presented to the company?

For more information on Laura Perkins and Hughes Hubbard & Reed, check out the firm’s website, here.

With Wells Fargo having been fined $1 billion for behaving badly, Jay Rosen and myself take a look at some of the top compliance stories over the past week.

  1. Wells Fargo has been fined $1 billion for variety of alleged misdeeds. Emily Flitter and Glenn Thrush report in the New York Times.
  2. Michael Held, general counsel and executive vice president of the Legal Group at the Federal Reserve Bank of New York, talks about the 3 lines of defense. His remarks are found in the NYU Compliance and Enforcement Blog.
  3. New Assistant DAG, Matthew Miner said in private practice he wants to give corporations more breaks on sentencing and cut back on Yates Memo. Will he continue to do so now that he is on the team? Adam Dobrik reports in GIR Investigative(sub req’d)
  4. Engaging in bribery and corruption still doesn’t pay as Feds seek 40-month sentence for cooperating Florida telecom exec. Dick Cassin reports in the FCPA Blog.
  5. If you lie to the DOJ and you are under a DPA, you are in big trouble, the ZTE experience. See Dick Cassin’s report in the FCPA Blog.
  6. Yet another guilty plea in the PdVSA corruption case. This time it was Ceasar Rincon and it was for money-laundering. Henry Cutter reports on it in the Wall Street Journal, Risk and Compliance Journal. See DOJ Press Release. See also Rincon’s Indictment.
  7. Will DPAs really work outside the US? Rick Messick explores in theGlobal Anti-Corruption Blog.
  8. Tom announces presales of his next book, the Complete Compliance Handbook, which will be published by Compliance Week in April 2018. It is available for PreSale here.
  9. The Everything Compliance gang is back in Episode 27 with a deep dive into Mark Zuckerberg’s Facebook testimony, the Michael Cohen subpoena and more. It is available on the FCPA Compliance Report, iTunes, Libsyn, YouTubeand JDSupra.
  10. Tom will be presenting a webinar with Opus Global and Hiperos on the Convergence of ABC and GDPR, next Wednesday, April 25 at 11 AM EDT. The event is at no charge. For registration and additional information, click here.

For more information on how an independent monitor can help improve your company’s ethics and compliance program, visit our sponsor Affiliated Monitors at www.affiliatedmonitors.com.

This week the gang goes for more of a roundtable Q&A with a couple of topics. We first consider the testimony of Facebook CEO Mark Zuckerberg before Congress and his company’s imbroglio with Cambridge Analytica and then the search warrant issued to Michael Cohen. Stayed tuned to the end for rants in this edition.

  1. Matt rants on the sexual scandals surrounding Missouri governor Eric Greitens. 
  1. Mike rants on inanity of quarterly FCPA enforcement statistics as being used for anything meaningful.
  1. Armstrong rants about the lack of authenticity of American politicians who film advertisements of themselves driving pick-up trucks.
  1. Jay gives a shout out and rants about his Boston Red Sox leading the AL.

I give a shout out to invertebrates and the most recent addition from the political class, Paul Ryan.

The members of the Everything Compliance panel include:

  • Jay Rosen– Jay is Vice President, Business Development Corporate Monitoring at Affiliated Monitors. Rosen can be reached at JRosen@affiliatedmonitors.com
  • Mike Volkov– One of the top FCPA commentators and practitioners around and the Chief Executive Officer of The Volkov Law Group, LLC. Volkov can be reached at mvolkov@volkovlawgroup.com.
  • Matt Kelly– Founder and CEO of Radical Compliance, is the former Editor of Compliance Week. Kelly can be reached at mkelly@radicalcompliance.com
  • Jonathan Armstrong– Rounding out the panel is our UK colleague, who is an experienced lawyer with Cordery in London. Armstrong can be reached at jonathan.armstrong@corderycompliance.com

In this episode, Matt Kelly and I go meta as we go into the weeds about Weed, in the context of the recent announcement by the administration that it would not prosecute persons or producers in states where marijuana sales are legal. In exchange for this concession, Colorado Senator Corey Gardner says he will lift a hold he placed on all Justice Department nominations since January. We also discuss the recent addition of John Boehner and William Weld as advisory directors to the marijuana producer Acerage and how this changing landscape impacts compliance.

For more see Matt’s blog post Weed Compromise Moves DOJ Nominees